Foreign Tax Deduction

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Definition of 'Foreign Tax Deduction'

One of the itemized deductions that may be taken for taxes paid to a foreign government, which typically are classified as a tax withholding. The foreign tax deduction is usually taken in lieu of the foreign tax credit, if the deduction is more advantageous to the taxpayer.

Foreign taxes are deductible from your U.S. income tax return only if the foreign source has an international tax treaty with the United States.
Investopedia Says

Investopedia explains 'Foreign Tax Deduction'

In most cases, the foreign tax credit will provide greater benefits than the deduction. However, the deduction may be more advantageous if the foreign tax rate is high and only a small amount of foreign income relative to domestic income has been received. If the foreign tax deduction is taken, it is reported on Schedule A of the 1040, and the credit can be claimed by filling out Form 1116.

For more information, see IRS Publication 514.

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'Foreign Tax Deduction'

  • Get A Tax Credit For Your Foreign Investments

    http://www.investopedia.com/articles/tax/08/foreign-tax-credit.asp
    ... who is eligible to claim the foreign tax credit has a choice between taking the
    credit, or deducting the foreign tax paid as a miscellaneous itemized deduction ...

  • 6 Corporate Tax Loops Obama Wants To Close - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0311/6-Corporate-Tax-Loops-Obama-Wants-To-Close.aspx
    ... 2. Foreign Tax Credit Your lemonade stand made money in another country and because ...
    doesn't believe that your oil company should receive a tax deduction for it ...

  • Give To Charity; Slash Your Tax Payment

    http://www.investopedia.com/articles/tax/10/give-to-charity-taxes.asp
    ... For instance, giving to most foreign charities, for-profit groups or donating your
    time ... longer use or money to charity is a great way to earn a tax deduction. ...

  • Series 7 Study Guide - Risk and Tax Considerations - Wash Sales ...

    http://www.investopedia.com/exam-guide/series-7/investment-risk-tax-considerations/wash-sale-substantially-identical.asp
    ... from a section 1256 contract, which includes regulated futures contracts, foreign
    currency contracts ... this investor would not qualify for a tax deduction for the ...

  • Reporting Your Interest Income

    http://www.investopedia.com/articles/tax/10/interest-income.asp
    ... country. If the foreign country has a tax treaty with the United States,
    this tax is usually either a deduction, or a credit. Box ...

  • Changes In Tax Legislation And Regulation

    http://www.investopedia.com/articles/05/taxlawchange.asp
    ... a statement that the taxpayer's deduction may not be more than the gross ... Form 1042
    Annual Withholding Tax Return for US Source Income of Foreign Persons. ...

  • 5 Tax Credits You Shouldn't Miss

    http://www.investopedia.com/articles/taxes/08/tax-credits.asp
    ... and families who have lost health coverage due to foreign business competition ... more
    about deducting your mortgage interest in The Mortgage Interest Tax Deduction ...

  • ADRs: Invest Offshore Without Leaving Home

    http://www.investopedia.com/articles/stocks/08/american-depositary-receipt-adr.asp
    ... American investor must still pay US income tax on the net dividend, the amount of
    the foreign tax may be claimed by the investor as a deduction against income ...

  • 7 Expenses You Won't Believe Are Deductible - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/1210/7-Expenses-You-Wont-Believe-Are-Deductible.aspx
    ... IRS decreed that any money won by foreign gamblers from ... more about business expenses
    in 10 Tax Benefits For ... implants to claim a depreciation deduction for the ...

  • Beginner's Guide To Tax Efficient Investing

    http://www.investopedia.com/articles/stocks/11/intro-tax-efficient-investing.asp
    ... offset their tax bill using the dividend received deduction (DRD), this ... these hybrids,
    since the US does not tax income from foreign investments that ...

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